Friday, October 01, 2010

Real Consumer Spending Increases in August to 27-Month High, Almost Back to Pre-Recession Level

According to today's report from the BEA on "Personal Income and Outlays," real personal consumption expenditures reached a 27-month high of $9,321.2 billion in August, the highest level of consumer spending since May of 2008 (see chart above).  Real consumer spending in August was just $34.3 billion (or 0.37%) below the peak of $9,355.5 billion reached in December 2007, the month the U.S. economy went into recession. 

In the 16-month period between January 2008 and April 2009, real personal consumption fell in 13 of those months; in the 16-month period from May 2009 to August 2010, consumer spending has increased in 13 months, as the economy has gradually recovered.  Over the last seven months, consumer spending has increased in every month except April.   The August increase in real spending was the fourth straight monthly increase and beat the expectations of economists.

This rebound in consumer spending over the summer is consistent with the widespread increases in August state tax revenues (which includes sales taxes) that were higher than expected in many states, see CD post here with 13 states reporting increases in August tax revenues.     


At 10/01/2010 9:38 AM, Blogger Unknown said...

Government transfer payments accounted for 60% of the growth in personal income. Are you giving credit to government for this slight increase?

Even if you ignore that fact, a 0.2% increase in PCE means sluggish growth in 3Q GDP where a 3-4% growth rate is necessary just to keep up with propulation growth. We're on pace to grow only 2% in 3Q.

Durable goods expenditures declined.

At 10/01/2010 9:45 AM, Blogger Angie said...

I hesitate to post here because I'm not sure exactly what the report encompasses, and I couldn't find it quickly.

But prices are higher now - food especially is jumping.

At 10/01/2010 3:55 PM, Blogger bobble said...

Irrippi is correct. Transfer payments accounts for the bulk of growth in personal income.

chart of personal income less transfer payments

At 10/01/2010 4:04 PM, Blogger Mark J. Perry said...

I reported on REAL (inflation-adjusted) CONSUMPTION EXPENDITURES, not personal income.

At 10/01/2010 4:34 PM, Blogger bobble said...

MP:"I reported on REAL (inflation-adjusted) CONSUMPTION EXPENDITURES, not personal income."

where do people get the money with which to consume?

At 10/01/2010 7:52 PM, Blogger Craig Howard said...

These figures, in a rational world, would certainly put an end to the shibboleth that consumer spending drives the economy. But what about business-to-business spending? We never seem to talk about that, do we.

Oh, that's right. The Keynesians think it would be double-counting to even mention it. So, off to the dustbin goes the lion's share of the economy.

At 10/03/2010 9:57 AM, Blogger Ron H. said...

"where do people get the money with which to consume?"

Well, they borrow it of course. :-)


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